SEC Charges $19-Million Insider Scam : Analyst Accused in 2nd-Biggest Case Agency Has Filed
The Securities and Exchange Commission today charged an analyst with Morgan Stanley Group Inc. with profiting from inside information in a $19-million scheme that an SEC official called the second-biggest insider trading case the agency has ever handled.
The SEC filed a civil complaint against Stephen Wang Jr., an analyst in Morgan Stanley’s mergers and acquisitions department.
The complaint asked the federal court in New York to order the return of $19 million in alleged trading profits plus triple that amount in damages.
Gary Lunch, the SEC’s enforcement chief, said the case is the second-biggest insider trading case ever handled by the commission, dwarfed only by a case brought in late 1986 against Ivan Boesky.
Also named in the complaint was Fred C. Lee, a Hong Kong businessman who allegedly traded on the information supplied by Wang.
Ask Freezing of Funds
Wang had been with Morgan Stanley for two years and had been in the mergers and acquisition division for one year, Lynch said in an interview.
“Over the course of the last year, we allege that he funneled information to Fred Lee, who then traded on that information,” Lynch said.
Investigators alleged in the complaint that Lee had tried to move money out of the United States and that for that reason funds in bank accounts should be frozen.
Lynch said investigators are alleging that the trading on inside information involved stock in about 25 companies including E. F. Hutton, Stop & Shop Cos., Utah Power & Light Co, Firestone Corp. and American Brands.
The SEC complaint against Boesky was filed in November, 1986. Boesky paid the commission a record $100 million to settle civil charges that he traded stocks on the basis of insider information provided to him by Dennis B. Levine, a former investment banker at Drexel Burnham Lambert Inc.
2 Serving Sentences
Both Boesky and Levine are serving sentences in minimum-security federal prisons.
The SEC complaint against Wang and Lee, who is a Taiwan citizen, comes after a House investigating committee charged earlier in the month that the commission was not doing enough to pursue insider trading by foreigners.
A subcommittee of the House Government Operations Committee had charged that insider trading by foreigners was growing as traders became more sophisticated in cloaking their identity by purchasing U.S. stock through overseas banks.
But SEC Chairman David S. Ruder had defended his agency’s handling of investigations involving foreigners, saying the commission had made substantial progress in coordinating investigations with other countries.
